Lightstream Resources (OTCPK:LSTMF) misses a deadline to renegotiate an existing line of credit, setting back its restructuring efforts after announcing plans last month to pay back much of its debt.

The deal to recapitalize nearly $1.2B of its debt obligated Lightstream to secure a new arrangement under its current credit facility, which the company had hoped to accomplish by today’s deadline; if it fails to do so by Friday, it could be forced to sell some assets or possibly the company.

Lightstream was among the most highly-leveraged companies in Canada’s energy sector, with debt at 100x cash flow at the beginning of Q2, according to one analyst.

Under the proposed recapitalization, secured noteholders would take 95% of the company’s equity, while unsecured noteholders would hold 2.75% and warrants equal to 5% as existing shareholders would own 2.25% of shares as well as warrants equal to 7.75% of the shares.

Lightstream's plan would reduce its annual interest payments by ~$112M.

Lightstream Resources (OTCPK:LSTMF) warns that it could fail to meet a debt payment obligation due in mid-June if it is unable to improve its balance sheet.

The Canadian company also says its borrowing base was cut to C$250M, giving it 90 days to repay its C$121M credit shortfall or trigger a debt default.

Lightstream says it is looking at various strategies to help its balance sheet, including asset sales and restructuring, but that funds flow from operations would not fund upcoming junior debt interest payment obligations without such assistance.

Roughly two-thirds of Legacy’s production folding into CPG's core areas, the land being acquired provides an attractive entry into an area of Saskatchewan where Legacy has been posting strong results, and the deal may have a positive impact on the prospects for CPG’s dividend.

Raymond James analyst Chris Cox thinks the deal provides investors with greater visibility around the sustainability of CPG’s dividend beyond 2015; he believes CPG will be able to fully fund its capital program and current dividend at $70-$75 oil prices in 2016.

Brian Kristjansen at Dundee Capital upgrades CPG to Buy from Hold, noting that Legacy’s overlevered position and resulting share price weakness allowed it to be bought at an attractive level.

Canada's S&P/TSX Composite Index suffered its biggest one-day loss in more than three years, plummeting as much as 462 points before settling for a 350-point beat-down, as resource stocks took a deep dive amid weakening crude oil prices.

Purpose Investments' Som Seif says the selloff suggests investors are growing even more worried about how the resource heavy-Canadian economy will fare in light of the collapse in oil prices: "We still have lower to go for oil, and so there is the potential for energy stocks to see an even further decline from these levels.”

Lightstream Resources (LSTMF+0.7%) says it has agreed to sell a package of 700 wells and other assets in Saskatchewan, which represents 20% of the production associated with its conventional business, to Spartan Energy (PTORF) for C$98M.

Lightstream now expects 2014 production to average 43K-45K boe/day, while cash flow guidance is unchanged at C$3.19-C$3.34/share.

Also says its seven-well battery in the Swan Hills region of Alberta and B.C. is operational.